A massive oil shift that’s led to lower prices at the gasoline pump is also translating to layoffs at two Beaver County plants.
Plants in Koppel and Harmony Township, part of global pipe manufacturer OAO TMK, based in Russia, are laying off about 10 percent of the workforce at both locations due to the rapid decline in oil prices, spokesman Roger Bentley confirmed Friday.
“In general, the rapid decline in oil prices has really resulted in a corresponding pullback of drilling activity in the oil and gas industry,” Bentley said. “As a result, we have adjusted our level of operations due to deteriorating business in that area.”
The two facilities have been employing about 750 workers, according to a company website. OAO TMK’s American division includes TMK IPSCO, which consists of 12 plants.
The shift comes as a U.S. benchmark for crude oil has dropped from more than $100 a barrel at the end of July to less than $50 in early January, which has also come with ripple effects in related operations throughout the industry.
The Koppel plant produces seamless oil-country tubular goods, drill pipe and line pipe used in the exploration, production and transmission of oil and natural gas, according to the company.
The Harmony facility converts cast round billets into seamless tubular products and provides other processing operations, such as heat treating and inspection services.
The pipe market is strongly affected by global oil prices, and restrictions to Western credit have further complicated the issue, the company has said.
In response to Russia’s military actions in Ukraine, the U.S. issued sanctions last year limiting certain financing to six Russian banks and four energy companies. The U.S. also suspended credit finance for exports to Russia and economic development projects there, part of actions it and other Western countries took.
In mid-January, the Moscow-based OAO TMK stated in a 2015 outlook that current oil prices could mean pipe needs in Russia might go down slightly, but major pipeline projects in the country will allow the company to boost shipments and improve product mix in one product segment.
The product segment of oil country tubular goods, known as OCTG, or pipe for oil and gas wells, is a different story, though.
“In the American market, TMK expects demand for OCTG to drop proportionately to the decrease in rig count,” the outlook said.
The company expects the decline in demand to be more severe during the first half of the year, “as inventories adjust to the deteriorating market conditions, with the possibility of a slight recovery during the second half of the year contingent upon an improvement in oil and gas prices.”
This article was written by David Taube from Beaver County Times, Pa. and was legally licensed through the NewsCred publisher network.